Sensitivity Analyses

 Sensitivity Analyses

The sensitivity analyses is basically is to observe the result due to changes made in the variable. In simple word it is used to calculate the impact of particular change.

Advantages of Sensitivity Anlyses

1.Check the initial Estimate :-

 This is an important tool to judge the expected variation in the initial estimates about the project. For example the initial estimate is that profit would be 10 million in case of 100 million sales, but what would be the results if the sales value would be 80 million.

2.Data Adequacy and Importance:-

 The Management frequently use the important data repeatedly so management would love to verify the accuracy of data used and its importance.

3.Critical Areas to be Focused:- 

This process identify to management what are the critical success factor or area for them. This information is really useful to perform the planning function especially controlling and decision making.

4.Interesting Exercise :- 

This is an interesting exercise for the management , when they can predict the future with the help of different data input